Running your small business without the proper insurance is a little like skydiving without a parachute.
Many variables determine what sort of business insurance you should carry, including the size of your business, whether or not you have employees, and what sort of work you do.
Wading through all of the insurance laws and recommendations can get frustrating. Here’s some information to help you get started.
Commercial Insurance
Not necessarily required (depending on the type of business you conduct, as well as state statutes), commercial insurance is nevertheless a highly recommended purchase for your small business. There are many different commercial insurance policies available, but here are a few of the more common ones:
- General Liability Insurance covers you in case of lawsuits arising from accidents or injuries that happen on your business property.
- Product Liability Insurance and Professional Liability Insurance protect you in case of product defects that result in injury, and malpractice or professional errors, respectively.
- Commercial Property Insurance covers loss and damage due to natural disasters, fire, and other emergencies. This form of insurance can also cover things such as lost income, business interruption, and company papers; you should consult an insurance expert to help define your needs in this area.
If your business is home-based, you may not consider business insurance a necessity. However, your homeowner’s policy is not likely to cover your business-related losses if something happens. You should consult with an insurance professional and discuss policies appropriate for your type of home-based business, such as professional liability insurance.
Employer Insurance
If you have employees and your business is in the United States, insurance is no longer optional — you’re required by law to carry some types of policies. Workers Compensation Insurance and Unemployment Insurance Tax are mandatory; what type and how much you’re required to pay will vary by state.
In addition, if your business operates in California, Hawaii, New Jersey, New York, Puerto Rico, or Rhode Island, you are required to carry disability insurance. Again, a tax professional in your area will be able to help you navigate the rules and regulations for your state.
Outside the U.S.
If your business is located outside the U.S., your insurance requirements and options may differ. Ask your insurance representative to help you decide what coverage is best for you. Some common policies to ask about include business income, accounts receivable, commercial general liability, property and commercial vehicle, and workers compensation/staff welfare insurance.
Purchasing Business Insurance
Look for a licensed, reputable commercial insurance broker to help you decide what kind and how much insurance you need. Your state’s department of insurance can help you find a broker, and you can also ask around for referrals from local businesses, or on social media. You’ll want to shop around to find the best deal, but be careful to choose the right insurance broker for your business.
If your business will need several different types of insurance policy, such as general liability, business vehicles, and property insurance, ask about an all-inclusive business owner’s policy. Bundling these forms of insurance together can help you save money; just be sure that the bundle addresses the needs of your specific business.
Finding the right insurance is a crucial part of Small Business Management 101. Though this can be a confusing issue, some time spent learning now can save you major headaches down the road.
Angie Mansfield is a freelance writer covering a range of topics for small business owners.
